https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/214

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E1121/2025 INTERNATIONAL CANCER INSTITUTE LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT **BACKGROUND** 1. The Appellant is a limited liability company incorporated under the Companies CAP 486 Laws of Kenya in the year 2018. The Appellant is a not-for- profit organization specializing in cancer care, research, training, and capacity across Sub-Saharan Africa. The Appellant is also an ESMO and a member of UICC championing international standards of care for all of its patients. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws. 3. The Respondent conducted an analysis of the Appellant's audited account, amended returns and some documents provided in support of the filled returns and established the inconsistence in capital expenditure, miscellaneous, surplus and office expenses for the period 2021. It was also established that the Appellant failed to withhold income tax when making payment for professional, audit and security fees for the year 2021. 1. An assessment was issued to the Appellant on 16th June 2025 in reletion to corporation tax (income tax company and withholding income tax. 2. The Appellant lodged an objection on 31st July 2025 3. Having considered the objection, the Respondent issued an objection decision dated 12th September 2025, seeking to recover income tax amounting to Kshs. 49,210,246 and principal withholding tax of Kshs. 183,016. 4. Dissatisfied with the objection decision, the Appellant lodged the appeal vide notice of appeal dated 22nd September 2025 and filed on 26th November 2025. # THE APPEAL 1. The Appellant lodged the memorandum of appeal dated 7th October 2025 and filed on the even date raising the following grounds of appeal: 1. That the Respondent erred in law characterizing the grants received by the Appellant as Taxable Income against the letter and the spirit of the grant agreements which only provide for expenses to be spent for a specific project and not as a business of making of profits. 2. That the Respondent erred in law by failing to note that the grants received by the Appellant from donors were not income chargeable to tax within the meaning of section 3 of the Income Tax Act Cap 470 Laws Cap 470(ITA). 3. That the Respondent erred in law in failing to apply the Provisions of Section 13 and Section 10 of the First Schedule to the ITA which clearly excludes the grants received by the Appellant from the provisions of Section 3 of the ITA. 4. That the Respondent erred in law in disallowing the Electronics & Equipment Expenditure of Kshs 22,677,984 and Furniture fitting Expenditure of Kshs 901,004 for Scientific Research which the Appellant was involved in as per the terms of the grants received by the Appellant in violation of the express provisions of Section 15(2)(n) of the ITA which allows the deduction of such expenditure in computation of tax payable under the Act. * 1. That the Respondent erred in law in treating the surplus, that is, unspent project funds, of Kshs 69,834,805 for the year 2021 which amount was within the grants received by the Appellant from foreign donors as a profit chargeable to tax in blatant disregard of the express agreements between the Appellant and the donors which provided specific timelines for completion of the funded projects which do not align with the normal financial year. 2. That the Respondent erred in law in holding that the amounts in question for the year 2021 were taxable owing the Appellant's lack of a tax exemption certificate which in essence means that the Respondent's interpretation expands the income chargeable to tax outside the express provisions of section 3 of the ITA. 3. That the Respondent erred in failing to note that the work carried on by the Appellant as per the grants received for scientific research were in tandem with the provisions of Section 13 and Section 10 of the First Schedule to the ITA which were for the alleviation of poverty, advancement of education and scientific research for the benefit of the people of Kenya. 4. That the Respondent erred in fact in disregarding the Appellant's explanations, documentations and audited financial statements when it alleged that there were unsupported of expenses of Kshs 27,820,253 comprising of training programme Kshs 13,849,948 professional fee Kshs 32,201,880 software Kshs 231,471, medical equipment Kshs 6,071,393, audit fee Kshs 104,400, postage and delivery Kshs 1334,447 and salary Kshs 277,560 respectively despite being supplied with all the receipts to support the expenses. 5. That the Respondent erred in law and in fact in raising an assessment for withholding tax of Kshs 183,016 for the year 2021 since all taxes that merited withholding were deducted and paid to the Respondent. # THE APPELLANT’S CASE 1. To support its case the Appellant relied on: 2. Statement of facts dated and filed on 7th October 2025, 3. A witness statement of Prof. Fredrick Chite Asirwa dated 12th September, 2025 and filed on 5th May 2026. 4. Written submissions dated 11th May 2026 5. The Appellant pointed out that on 14 th October, 2024, the Respondent issued the Appellant with a notice under section 24(1) and 59 of the Tax Procedures Act Cap 469B (TPA) regarding the filing of income tax returns. 6. It stated that on 11 th December,2024 the Respondent issued a notice under section 31 of the TPA concerning the filing of income tax returns which the Appellant subsequently filed on 17th January, 2025 with respect to the year 2021. 7. According to the Appellant, the Respondent conducted an analysis of the audit of the accounts, amended returns and the documents provided and came up with the additional assessments as communicated in the letter dated 26th June, 2025. 8. The Appellant averred that the Respondent issued additional assessments to the Appellant and demanded payment of the total sum of Kshs 46,216,924 in the event payment was made by 30th June, 2025 to get waiver of penalties and interests. The Appellant being dissatisfied with the additional assessments raised an objection to the additional assessment. 9. The Appellant pointed out that the total amount demanded by the Respondent as per the objection decision dated 12th September 2025 is Kshs 67,007,218. 10. The Appellant submitted the appeal was validly lodged. It submitted that the Objection Decision was issued on 12th September 2025 and that it had 30 days to lodge the notice. The Appellant lodged the Notice of Appeal dated 22nd September, 2025 on 23rd September, 2025 at 12:12 pm via email and CTS and that the Notice of Appeal was acknowledged by the Secretariat on 23rd September, 2025 at 12:36pm as duly filed. It submitted that the Respondent was also copied in the same email through legalservices@kra.go.ke. 11. The Appellant also submitted that it had 14 days to lodge the appeal. It submitted that filed the appeal on 7th October, 2025 which was within the 14 days period provided for in law. It submitted that the Notice of Appeal and the Appeal were filed within the timelines required by law, and that any event the Respondent filed its Statement of Facts on 20th January, 2026 which was way outside the required timelines of 7 days. 1. On the issue of not contesting the withholding tax, the Appellant submitted the Appellant’s Objection and the appeal raises the issue of whether the income it received from donors should be subject to taxation in the first place. Thus, the issue withholding tax is intertwined on the issues raised for determination both in the Objection and in this appeal. 2. The Appellant has also submitted that it has not made any concession as required, for the provisions in section 52(2) of the Tax Procedures Act to apply as was held by the Tribunal in the case of ***Nairobi TAT C No. 356 of 2023 Dinesh Construction Limited v Commissioner of Domestic Taxes*** 3. The Appellant also submitted that the grants received by the Appellant are not chargeable to tax as a grants is not income within the meaning of Section 3 of the ITA. 4. The Appellant cited the case of ***Commissioner of Domestic Taxes v Thika Road Baptist Ministries (Tax Appeal E024 of 2021) [2022] KEHC 644 (KLR);*** and ***African Research Collaboration for Health Limited v Commissioner of Domestic Taxes TATC E313 of 2023*** to submit that it is only the income that is chargeable that is exempt from tax under section 13 as read with First Schedule of the ITA. 5. Apart from the foregoing, the Appellant submitted that the surplus/unspent project funds should not be treated as profits chargeable to tax; and that the Appellant has sufficiently proved the expenditures it claimed to have incurred in the course of its operations. # Appellant’s prayers 1. The Appellant prayed as follows: 2. The Appeal herein be allowed; 3. The Objection Decision Dated 12th September, 2025 be set aside in its entirety; 4. The Tribunal be pleased to find that the grants received by the Appellant from foreign donors which were not claimed in Kenya were not taxable income within the meaning of the ITA. 5. Costs of the appeal be awarded to the Appellant. # THE RESPONDENT’S CASE 1. The Respondent filed statement of facts dated 20 th January 2026 and filed on 21st January 2026. 2. It stated that an assessment was issued to the appellant on 16 th June 2025 in relation to corporation tax. It averred that the appellant lodged an objection on 31st July 2025. However, the objection was limited to the issue of corporation tax. According to the Respondent, no objection was lodged on the issue of withholding tax. The Respondent therefore opined that the said objection was invalid as the appellant failed to comply with section 51(3) (b) of the TPA as it did not pay the tax not in dispute or entered into arrangement to settle the same. 3. Having considered the objection, the Respondent issued the objection decision wherein expenses were disallowed due to lack of support. 4. According to the Respondent, the Appellant failed to provide the records to support the claimed expenses. It asserted that the miscellaneous costs were not explained and surplus were claimed as an expense yet it does not qualify as expenses under Section 15 of the ITA. 5. The Respondent contended that the Appellant objected on the ground that the funds received from sponsors were grants for research and other activities and not taxable income to be charged income tax as provided under Section 3 of the ITA. 6. The Respondent maintained that the Appellant was unable to satisfy the Respondent that the surpluses were exempt from income tax since there was no exemption certificate in place to guarantee exemption as provided under First Schedule Paragraph 10 of the ITA. 7. According to the Respondent, the nature of the operations would not by itself exempt the income received without the exemption certificate. The Respondent hence confirmed the assessment of the surpluses for 2021. 1. The Respondent asserted that the Appellant failed to provide any records to support the expenses disallowed for 2021 and that the taxpayer never provided any records or explanations to address the withholding default assessment for the period 2021. 2. The Respondent pointed out that whereas the objection decision was dated and communicated on 12th September 2025, a notice of appeal is dated 22nd September but filed with record of appeal on 26th November 2025. Therefore, the Respondent averred that the appeal was filed out of time. 3. It stated that even if the notice of appeal was filed on 22nd September 2025 as per the date of the document, the memorandum of appeal was only filed on 7th October 2025, outside the timelines. 4. The Respondent equally contested the validity of notice appeal for noncompliance with section 52(2) of the TPA on the basis that the Appellant did not lodged an objection on the issue of withholding tax therefore, it cannot now purport to lodge an appeal against the same. The Respondent asserted that doing do is contrary to section 56(3) of the TPA. 5. It asserted that the Appellant has not sufficiently proved that the Respondent's decision is incorrect or that the assessment is excessive. 6. The Respondent did not file written submissions. # Respondent’s prayers 1. The Respondent prayed that: 1. The objection decision be upheld; and 2. That this appeal be dismissed with costs to the Respondent as the same is without merit. # ISSUES FOR DETERMINATION 1. The Tribunal has considered the parties’ pleadings and submissions, and has identified the following issue for determination: # Whether the appeal is properly before the Tribunal; 1. **Whether the grants received by the Appellant are taxable under the ITA;** 2. **Whether the Respondent was justified in disallowing expenditures claim by the Appellant;** 3. **Whether the Respondent erred in law in treating the surplus, that is, unspent project funds in relation to the grants received by the Appellant from foreign donors as a profit chargeable to tax;** 4. **Whether the Respondent erred in holding that the amounts for the year 2021 were taxable owing the Appellant's lack of a tax exemption certificate; and** 5. **Whether the Respondent erred in raising an assessment for withholding tax of Kshs. 183,016 for the year 2021 considering that all taxes that merited withholding were deducted and paid to the Respondent.** **ANALYSIS AND FINDINGS** 1. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether the appeal is properly before the Tribunal. 1. The Respondent raised an issue on validity of the Appellant’s appeal on the basis that whereas the assessment was issued to the appellant on 16th June 2025 in relation to corporation tax (income tax company and withholding income tax), the appellant lodged an objection on 31st July 2025 but the objection was limited to the issue of corporation tax. The Respondent asserted that no objection was lodged on the issue of withholding tax. The Respondent therefore, contended that the said objection was invalid as the Appellant failed to comply with Section 51(3)(b ) of the TPA as it did not pay the tax not in dispute or entered into arrangement to settle the same. 2. In effect, the Respondent raised a preliminary objection against the appeal and the Respondent having raised a preliminary objection in its pleadings, the Tribunal has to examine its merit before making further steps. 3. In the case of **Mukisa Biscuits Manufacturing Co. Ltd v West End Distributor Ltd [1969] E.A 696**, Law JA had an opportunity to deliberate on matters of preliminary objections as follows: *“a preliminary objection consists of a point of law which has been pleaded or* ***which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit****. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration….****a preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct.*** *It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.”* 1. Section 51 of the Tax Procedures Act establishes the statutory framework governing objections to tax decisions and prescribes the mandatory conditions that must be satisfied before an objection may be regarded as validly lodged. The validity requirements under Section 51(3) are not mere procedural technicalities; rather, they constitute substantive jurisdictional prerequisites intended to ensure that the Commissioner is informed with precision of the issues in dispute while securing payment of any tax that the taxpayer does not challenge. Compliance with those requirements is therefore mandatory, and failure to satisfy them renders the notice of objection invalid for purposes of the Act. In particular, Section 51(3)(b) provides as follows: 2. *Objection to tax decision* 1. *A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.* 2. *A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.* 3. *A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—* 1. *the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;* 2. *in relatio n to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1).* 3. The purpose of Section 51(3)(b) of the Tax Procedures Act is to distinguish between tax that remains genuinely in dispute and tax that the taxpayer has elected not to contest. A taxpayer who receives an assessment comprising several distinct tax heads is required to specify, with precision, which aspects of the assessment are challenged. Any component of the assessment that is neither objected to nor otherwise disputed in accordance with the Act ceases to be the subject of controversy and is treated as tax not in dispute for purposes of the statutory objection process. This requirement ensures certainty in tax administration and prevents taxpayers from raising new disputes after the statutory objection stage has been concluded. 4. In the present case, the Respondent contended that although the assessment comprised both corporation tax and withholding tax, the Appellant’s Notice of Objection challenged only the corporation tax assessment. 5. Consequently, according to the Respondent, the withholding tax assessment remained uncontested and therefore constituted tax not in dispute within the meaning of Section 51(3)(b) of the Tax Procedures Act. The Respondent further maintained that, since the Appellant neither paid the withholding tax nor entered into a payment arrangement under Section 33 of the Act, the Notice of Objection was invalid. 6. The Appellant, argued that the withholding tax assessment was intertwined with the broader dispute regarding the taxability of donor-funded grants and that no concession had been made in respect of any part of the assessment. While the Tribunal appreciates that different tax heads may arise from the same factual matrix, the statutory scheme established under Sections 51 and 52 of the Tax Procedures Act requires each disputed tax decision to be expressly challenged at the objection stage. It is therefore insufficient for a taxpayer to contend generally that the entire assessment is disputed without demonstrating that each impugned assessment was specifically brought within the scope of the Notice of Objection. 7. The Tribunal must therefore determine, on the basis of the evidence placed before it, whether the Appellant has demonstrated that the withholding tax assessment formed part of its Notice of Objection. This determination is critical because, if the withholding tax assessment was not objected to, it became tax not in dispute for purposes of Sections 51(3)(b) and 52(2) of the Tax Procedures Act, with the consequence that payment of that amount, or a statutory arrangement for its payment, became a mandatory precondition to both a valid Notice of Objection and a competent appeal before this Tribunal. 1. The Respondent maintained that the Appellant’s Notice of Objection challenged only the corporation tax assessment and did not contest the withholding tax assessment. The Appellant, on the other hand, asserted in its Memorandum of Appeal that all taxes liable to withholding tax had been deducted and remitted. However, despite that assertion, the Appellant did not place before the Tribunal either the Notice of Objection or any contemporaneous correspondence demonstrating that the withholding tax assessment formed part of the objection lodged under Section 51 of the Tax Procedures Act. The Tribunal is therefore unable to verify the scope of the objection from the evidence placed before it. 2. Under Section 56(1) of the Tax Procedures Act, the burden of proof rests upon a taxpayer to demonstrate that a tax decision is incorrect. Where the validity of an appeal depends upon whether a particular assessment was objected to, it is incumbent upon the taxpayer to produce the Notice of Objection or other credible evidence showing that the disputed tax head was expressly challenged. In the absence of such evidence, and considering the Respondent’s uncontroverted assertion that withholding tax was not objected to, the Tribunal is unable to conclude that the statutory objection extended to the withholding tax assessment. 3. Consequently, the Tribunal finds that the Appellant has failed to discharge the statutory burden of proving that the withholding tax assessment formed part of the Notice of Objection and it therefore follows that the withholding tax assessment remained uncontested for purposes of Section 51 of the Tax Procedures Act and therefore constituted tax not in dispute within the meaning of Sections 51(3)(b) and 52(2) of the Act. 4. The High Court in **Commissioner of Domestic Taxes v Dinesh Construction Limited [2025] KEHC 17058 (KLR)** held as follows in relation to “tax not in dispute”: 1. *The crux of the dispute here is the definition of “tax not in dispute”. The Appellant argues that the tax becomes undisputed if it is not specifically objected to in the Notice of Objection filed under section 51(3). The Respondent argues that tax is only undisputed if explicitly conceded.* 2. *Section 51(3) is prescriptive. It requires a Notice of Objection to state precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for amendments. This statutory language is not merely procedural; it is substantive. It delimits the scope of the dispute. If an assessment covers 5 items, and the taxpayer only provides grounds objecting to 2, then remaining 3 items are legally accepted. The Commissioner is entitled to treat the unobjected portions as final and conclusive debts.* 3. *In* ***Commissioner of Domestic Taxes vs Diara Limited [2022] KEHC 80 (KLR)****, the Court emphasized that the objection process is the primary mechanism for crystallizing the dispute. Once the objection window closes, any item not traversed by the objection becomes a crystallised debt* 5. Having found that the withholding tax assessment was not demonstrated to have been objected to, the Tribunal must determine the legal consequences of that omission. Section 52(2) of the Tax Procedures Act provides that a Notice of Appeal relating to an assessment is valid only where the taxpayer has paid the tax not in dispute or entered into an arrangement with the Commissioner for payment of that amount before lodging the appeal. 6. Since the withholding tax assessment remained unchallenged, it became tax not in dispute for purposes of the Act. The Appellant neither produced evidence of payment of the withholding tax nor demonstrated that it had obtained an extension of time or entered into any payment arrangement under Section 33 of the Tax Procedures Act. Accordingly, the Tribunal finds that the statutory condition precedent to a valid appeal was not satisfied. 7. The Tribunal is fortified in this conclusion by the decision of the **High Court in Commissioner of Domestic Taxes v Dinesh Construction Limited [2025] KEHC 17058 (KLR)**, which clarified that any component of an assessment not specifically challenged in a Notice of Objection becomes tax not in dispute, and that failure to settle such tax renders a subsequent appeal incompetent under Section 52(2) of the Tax Procedures Act. Being bound by that decision, the Tribunal is obliged to apply the same principle to the present dispute. 1. In light of the foregoing findings the Tribunal is persuaded that the statutory preconditions governing the institution of appeal were not satisfied. The Notice of Appeal was therefore incompetent and the Tribunal lacks jurisdiction to entertain the substantive merits. 2. Further, Although the foregoing finding is sufficient to dispose of the appeal, the Tribunal considers it appropriate to address the Respondent’s alternative objection regarding compliance with the timelines prescribed under Section 13 of the Tax Appeals Tribunal Act. 3. The Appellant submitted that the Notice of Appeal was transmitted to both the Tribunal Secretariat and the Respondent by electronic mail on 23rd September 2025 and relied on acknowledgements allegedly issued by the Secretariat. However, no documentary evidence demonstrating acceptance of that filing as the official date of lodgement before the Tribunal was produced for consideration. Conversely, the Tribunal’s official Case Tracking System records indicate that the Notice of Appeal was lodged on 26th November 2025. 4. In the absence of cogent evidence demonstrating that the Notice of Appeal was validly lodged within the statutory thirty-day period prescribed under Section 13(1) of the Tax Appeals Tribunal Act, the Tribunal is unable to depart from its official records. On the material presented before it, the Tribunal finds that the Notice of Appeal was filed outside the statutory period and no application for extension of time was made or granted. Consequently, the appeal would equally have been incompetent on this ground. 5. In light of the above analysis, the Tribunal finds and holds that the appeal is procedurally incompetent for failure to satisfy the mandatory statutory requirements governing objections and appeals under the Tax Procedures Act and, independently, for failure to demonstrate compliance with the timelines prescribed under the Tax Appeals Tribunal Act. 6. Based on the foregoing, the Tribunal finds and holds that the appeal is invalid thus ripe for striking out. 7. Having established the foregoing, the remaining issues for determination are hereby rendered moot. # FINAL DECISION 1. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is invalid and makes the following Orders:- 2. The Appeal be and is hereby struck out; and 3. Each party to bear its own cost. 4. It is so ordered. # DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF JULY 2026 SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. SANKALE SPENCER OLOLCHIKE** **HON. BERNADETTE MUTHIRA GITARI** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-03 13:53:10